April 27, 2009
Volume XXVI, Issue 3

Sign Up Now for P2P MEDIA SUMMIT LA

The new array of special pre-registration rates end Monday April 27th for the fourth annual P2P MEDIA SUMMIT LA (P2PMSLA) coming to Santa Monica, CA next week on Monday May 4th. Thanks to Digital Hollywood's Victor Harwood for inspiring this new rate plan.

The special P2PMSLA pre-registration rates expiring 4/27 include student at $75, under-employed at $99, unfunded start-up at $250, VC funded start-up at $349, academic/analyst at $375, and standard at $399.

Adding registration for DHS brings the total fees for both events to just $150 for students, $204 for under-employed, $385 for unfunded start-up, $649 for VC funded start-up, $799 for academic/analyst, and $825 for standard.

To obtain one of the specially discounted rates, please call +1-410-476-7964 or e-mail sari@dcia.info.

To sign-up at the standard pre-registration rate, please click here. If you can't be there in person, you can still participate virtually - by signing up for the live DCIA event webcast presented by Abacast.

Study: 86% Will Pay For Licensed P2P

The Swedish Performing Rights Society (STIM) has released a study titled Pirates, File Sharers, and Music Users that reaffirms the lures of P2P and, for a change, attempts to put a price on users' willingness to pay for authorized and unlimited downloads.

Free access, ease of use, and portability were cited as top reasons for using P2P. Though responses varied by age and other factors, many respondents said they would be willing to pay between roughly $6 and $17 in monthly fees for a licensed P2P service.

STIM surveyed 1,123 Swedes via an online questionnaire. Sweden is the home of BitTorrent tracking site The Pirate Bay (TPB) as well as a fairly relaxed attitude about copyright infringement. Half have a digital music collection of over 1,000 songs. A majority had paid for less than half of their digital music collections.

More than 86% of respondents would be interested in paying a voluntary fee for licensed P2P (52% were very interested, 35% were somewhat interested). Just over 5% had no interest in such a plan. The greatest disinterest for such a plan came from people with the largest digital music collections and the third of people who had paid for less than 10% of their digital music collections.

Streaming services are widely hoped to be a replacement for unauthorized file sharing. The STIM survey indicates streaming does not satisfy the needs of a good portion of Swedish file sharers - 80.5% say collecting music and having off-line access to a music collection are important to them.

In the future, listeners will be connected more often and off-line access should not be as great a concern. For now, though, streaming is only a part-time solution for unauthorized file sharing.

Portability is another important aspect for these file sharers. 90.3% said they desire to transfer music files in order to be able to listen elsewhere.

Study: File Sharers 10 Times More Likely to Buy Music

According to research, those who download free music are also the industry's largest audience for digital sales.

Copyright infringement may be the bane of the music industry, but, according to a new study, it may also be its engine. A report from the BI Norwegian School of Management has found that those who download unauthorized music are also ten times more likely to pay for songs than those who don't.

Everybody knows that music sales have continued to fall in recent years, and that file sharing is usually blamed.

We are made to imagine legions of Internet criminals, their fingers on track-pads, downloading songs via BitTorrent and never paying for anything. One of the only bits of good news amid this doom-and-gloom is the steady rise in digital music sales: millions of Internet do-gooders, their fingers on track-pads, who pay for songs they like - purchasing them from Amazon or iTunes Music Store.

And yet according to Professor Anne-Britt Gran's new research, these two groups may be the same.

The Norwegian study looked at almost 2,000 online music users, all over the age of 15. Researchers found that those who downloaded free music - whether from licensed or unlicensed sources - were also 10 times more likely to pay for music. This would make music infringers the industry's largest audience for digital sales.

Wisely, the study did not rely on music infringers' honesty. Researchers asked music buyers to prove that they had proof of purchase.

Since the public announcement at MIDEM of IOM's plans to create, in the words of TAG Strategic's Ted Cohen, a unique and very valuable "digital sandbox" for the music industry, Ron Berry has been on a whirlwind tour of meetings with music and technology industry representatives, including P2P companies and Internet service providers (ISPs), on many levels in multiple counties.

In twelve short weeks, IOM's initial approach has evolved through an iterative process involving stakeholders from all sectors. In particular, the plan now responds fully to issues voiced by Universal Music Group (UMG) chief executive Lucien Grainge at last week's Digital Britain Summit.

What P2P MEDIA SUMMIT LA delegates will be the first to hear next week reflects a program that has quickly come a long way in addressing concerns of all constituencies - to the point that it's now an unprecedented and truly history-making initiative.

Adding registration for Digital Hollywood Spring brings the total fees for both events to just $150 for students, $204 for under-employed, $385 for unfunded start-up, $649 for VC funded start-up, $799 for academic/analyst, and $825 for standard.

To obtain one of the specially discounted rates, please call +1-410-476-7964 or e-mail sari@dcia.info. To sign-up at the standard pre-registration rate, please click here.

Analysis: What IFPI & RIAA Numbers Reveal

Recently released numbers from IFPI and RIAA show continued losses in physical formats, varying success in mobile, and slowing digital growth as markets mature. Fueled by a large drop in CD sales and lower wholesale values, North America led the four global territories (Europe, Asia, and Latin America are the others) in total trade revenue decline.

North America had a total of $4.98 billion in recorded music trade revenue in 2008. That represented a drop of 18.6%. Trade revenue from physical - nearly all of it from CD sales - dropped 31.2%. The drop in trade revenue from physical formats is much larger than the drop in unit sales. Europe, whose digital market is less mature than the US market, experienced a 36.1% increase in digital trade revenues while physical format revenues dropped only 11.3%. Globally, physical revenue dropped 15.4% and digital revenue climbed 24.1%.

A physical trade revenue drop of 31.2% in North America comes with several implications. First, the loss of physical format revenue was greater than the decline in unit sales. According to Nielsen Soundscan, US CD unit sales dropped 19.7% in 2008. The RIAA has put the decline in retail value of US physical shipments at 28%. The numbers show evidence of downward pressure on retail and wholesale prices that is compounding losses from format substitution. Consumers are switching from CDs, which offer the highest per-unit trade revenue, for digital albums and track downloads. The number of unique transactions is greater but the resulting revenue is lower.

Second, digital revenue growth is coming almost entirely from digital downloads. Mobile revenue has dropped slightly; and ad-based services are providing little revenue at this early stage. Some mobile bright spots have been overshadowed by drops in areas. According to the RIAA, a 36% increase in mobile downloads and an 18% rise in ring-back tones was more than offset by a 17% decrease in ringtones.

Overall, there was a 6.5% decrease in mobile unit shipments (downloads) and 7.3% decline in mobile's retail value. Another part of digital revenue is subscription services. Mobile subscriptions continue to mirror PC-based subscriptions in their limited popularity. The RIAA put the value of US subscription revenue at $188.2 million, a 6.5% decline from 2007.

Digital has the opportunity to offer better margins than physical formats. Even though less trade revenue is being collected, improved margins from digital sales offer hope for a soft landing as total revenue bottoms out. There are still burdensome costs to bringing music to market, but losing CD sales for digital sales means eliminating the high cost of in-store marketing as well as the obvious costs of manufacturing, storing, and distributing physical product. As the size of the record industry continues to contract, it adjusts to the realities of lower revenues and more efficient digital distribution.

BitTorrent's Bram Cohen on the Music Biz

AO: At the top of the music business is it still about control and trying to close down P2P, rather than licensing?

BC: It's not so much about the music - the important thing is the recommendation. It's that users are aggregating and organizing the content. So the lesson seems to be that trying to control everything is passing up a lot of value that consumers want to bring to the equation.

AO: Publishers lost control at the start - that's how performance rights started. The big record companies are still stuck at counting physical units...

BC: Music has a bigger problem: it's that people want to make it. It's the peacock's tail. We have unbelievable amounts of music, an oversupply. People pay a lot to learn how to play music and it's ridiculous to expect people to make money off it. Normally if you want to make money you do something no one wants to do.

AO: I'm not sure it's ridiculous, because people have always willingly paid for recorded music - sometimes we've paid for it more than once! Also whatever music is in most demand - the stuff people actually want - is always in scarcity. There are 13 million songs on iTunes and nine million have never been downloaded once. So at any time, good music is scarce.

BC: There was one recent year where the number of albums in the US was 200,000, and of those, 15 sold a million copies, and only one did it without major radio support. People have switched to using iPods, because fundamentally using radio is an awful experience. When I'm driving my car, I want to hear the music. This will keep happening more and more - the size of hits is going down.

AO: Well, that's the unbundling.

BC: It's the supply of the product.

AO: And competition at retail lowering the price of CDs to something sensible. And people making CDs for friends. Something like 87% of the fall in value in recorded music was not P2P. But don't you think there's value there? I've got albums I bought at school that I've played loads of times.

BC: You're talking about value, you're making an assumption about demand. So in some sense value has to do with demand. If there's tremendous value that means there's huge amounts of demand. But there might be tons of supply.

Billboard Q&A: Brand Asset Digital's Joey Patuleia

Brand Asset Digital, the company that offers brands the ability to market their products via P2P search terms similar to Google's AdWords service, came out with a new product this week called P2Ppulse.

In a nutshell, P2Ppulse allows labels and artists to track how fans are downloading their music from P2P networks. The metrics include where and when their music is downloaded, how often a file is played, and how it is shared with others.

Joey Patuleia, the company's Co-Founder, says it's aimed to help the music industry better market music based on where the interest is.

AB: So what's the advantage of P2Ppulse?

JP: On radio, you're going to pay someone to promote your record. That's like a hit or miss business. And even if you get those spins, you're getting SoundScan or BDS spin reports, which are very general. With the P2P data, for a fraction of the cost people pay for radio promo, you're getting a specific download geographic number and other data around who this person is, where they are on the network, and what else they might be into and downloading.

AB: Why P2P?

JP: People are looking for consumption metrics. Who is my fan? And when you look at the music industry, the only metrics there are, are how many spins you get. That's crazy.

AB: But labels are collecting all sorts of data on how their music is sold and streamed online. They can collect that internally through their licensing deals with those other outlets. It's not like they're not able to collect consumption data.

JP: Sure. But at the same time, even the metrics on the web side, they're not really telling you much outside of the general surfing and engagement on social networks. The fact of the matter is that people are discovering this music on these social nets or on the radio, and they're going right to P2P and downloading it. So at the end of the day, that's the biggest black hole. To never have had metrics around what those people are doing or be able to compare who's downloading what.

uTorrent Is Going to Make Money with a Toolbar

New users of uTorrent may shortly have the option of something extra with their BitTorrent client. In a move to generate incremental revenue, new installs will have the ability to include the Ask.com browser toolbar in addition to the most popular torrent client in use today.

This February, BitTorrent added Google powered torrent search to the uTorrent website as an income generator, and it's still looking for additional sources of revenue. This is where Ask.com comes in with its browser toolbar, which is used to monetize other P2P clients as well.

Simon Morris, Vice President of Product Management at BitTorrent, said that the toolbar will be included in new downloads of uTorrent 1.8.2. He assured people that it would be optional, and that the executable will not bring any size increase beyond the download option page. Also, those doing an upgrade will not be prompted about the bar.

While browser toolbars have sometimes gained a reputation as being malware vectors, this is usually due to third-party advertising. The toolbars generally make money though the search traffic that is generated by their users, and that is also the reason why most torrents sites - The Pirate Bay (TPB) and Mininova included - now offer their own toolbars.

What BitTorrent is aiming for is simply an extra influx of cash. What it is not looking to do is annoy its users, a point Simon is firm on. "To be very clear - uTorrent is very popular free BitTorrent software - the only thing we hope to change here is to make it even more popular. We hope the community will continue to support us in our efforts."

If clients are to continue to develop, then, with the current shortage of venture capital, there need to be other ways to generate income. If the addition of one simple installer option about a browser toolbar means that uTP can be funded to completion, is that really such a bad thing?

BuyDRM Delivers KeyOS Solution to QTRAX

BuyDRM, a Microsoft-licensed PlayReady digital rights management (DRM) solutions and service provider, successfully launched its KeyOS Silverlight DRM offering with QTRAX. Utilizing KeyOS, QTRAX will be able to expand its customer base and increase revenues. The KeyOS Silverlight DRM Solution provides a dedicated, scalable, and robust platform for QTRAX to securely deliver content to the majority of Internet users.

"We have been using KeyOS for over a year now and have been highly anticipating the launch of Silverlight DRM powered by PlayReady. With support for PCs, Macs, and soon Linux, the KeyOS Silverlight DRM Solution will allow us to tap into previously inaccessible audiences - immediately increasing our customer reach, relevance, and revenue," said Christopher Roe, CTO of QTRAX.

"QTRAX's enhanced capabilities are a testament to the superiority of BuyDRM's KeyOS platform. We are obviously very excited that our Silverlight DRM offering is now available and an industry first as both a solution and a service" said Christopher Levy, CEO and Founder, BuyDRM.

"This achievement provides BuyDRM an opportunity to further distance the KeyOS platform from competitive offerings."

Cisco Offers Security for Cloud Computing

Cisco Systems on Tuesday introduced new network security products to help protect companies' web-based software and services from attacks on their networks.

Large companies are moving more of their software and services online, trends often called "cloud computing" and "software as a service (SaaS)," to help users communicate and share information.

Such services, delivered through data centers, help companies use less space and computing power. But worries about viruses and external attacks on corporate data and computer systems, due to the open nature of such services, have been obstacles to greater adoption.

Cisco, known for making routers and switches, has been expanding into a wider range of products including software. It has identified collaborative software and cloud computing as key areas of growth.

The new security products will include software that filters through online traffic as well as services that help companies assess their overall technology security, it said.

Cisco also said on Tuesday that it was upgrading its WebEx online meeting software by introducing more advanced routing systems that help handle the increase in online traffic.

Cisco bought WebEx, a company specializing in web-conferencing software that incorporates features like instant messaging (IM) and file sharing, in 2007.

GridNetworks & GMS Bring GridCast TV to the Big Time

Industry leading peer-to-peer television (P2PTV) service and HD streaming maven GridNetworks has merged with Global Media Services (GMS) to create what the two companies term as the "first comprehensive streaming and media services platform."

We know GridNetworks is all about P2P GridCasting delivery technology that would let many view lag-free high definition (HD) streams over the Internet, and it seems that GMS is all about putting on live streaming events, so this should let them keep doing that, but in even higher quality.

The first media company/brand/event to take advantage of this pairing? We're still waiting to hear that.

Anti-P2P Plan Voted Down by European Parliament

You probably know about France's President Nicolas Sarkozy's plans to pay for corporate entertainment cartel development using taxpayers' money, and now this issue has been debated by the European Parliament.

Sarkozy is one of the many leaders that have been pressed by Disney, NBC Universal, Fox, Sony, Vivendi Universal, EMI, Viacom, Time Warner, Warner Music, and Sony Music to help them bury copyright infringement. Of course, the companies listed want to use the government's money in their own interest - and Sarkozy agreed.

Fortunately for taxpayers, the European Parliament disagreed with his intentions, because it's not quite the right way to use taxpayers' money.

Amendment 46 stated that "restrictions to the fundamental rights and freedoms of Internet users can only be put in place after a decision by judicial authorities except when public security is threatened," and the European politicians voted 40 to 4 against Sarkozy's intentions.

So this is the end of France's anti-P2P plan.

Pirate Bay: Something Rotten in the State of Sweden

No matter what you may think about the ethics and legality of file sharing, or whose side you take in the debate over The Pirate Bay (TPB) and last week's conviction of the four men who set up the notorious website, most of us would have expected the trial to be fair and open, and the judge to be impartial.

Afraid not. It turns out that the judge in the case is a member of various bodies lobbying for copyright protection and has worked, commercially, for a US organization representing the interests of the American movie industry. Seems His Honor forgot to mention his interests, and somehow failed to disqualify himself from conducting the trial.

Naturally enough, defense lawyers have pounced on the revelations and are demanding the four men get a retrial, immediately. The Swedish media has also swung into action to castigate the judge and question his impartiality and motives.

A journalist on Swedish state radio broke the news that Judge Tomas Norstrom is a fully-paid up member of two Scandinavian copyright protection groups - a charge that the judge was later forced, reluctantly, to admit is true.

Norstrom has acknowledged that he is a member of the Swedish Association for Copyright and a board member of the Swedish Association for the Protection of Industrial Property. What's more he also admits to having worked with one Monica Wadsted who is not only a lobbyist for the US film industry but who also actually represented it at TPB's trial.

If that doesn't give some indication of where the judge's sympathies lie in this matter, then I'm a banana. However, the brass-necked Judge Norstrom himself outright denies that there was any conflict of interest on his part.

The four TPB defendants not only got a year in the slammer - they are out on bail pending an appeal - they were also ordered to pay a total of $3.5 million in damages to the likes of Columbia Pictures, EMI, Sony Music Entertainment, and Warner Brothers.

All four defendants say they won't pay - under any circumstances - and claim that the court case is prima facie evidence in and of itself that the establishment and vested commercial interests simply don't understand the nature of the Internet. Cut off one head, and like Medusa of old, two more spring forth to take its place. It's the way of the web.

TPB's four say file sharing will continue and its popularity will grow, and add that the only way to resolve the thorny issue of copyright infringement is for the content producers to reach some sort of a negotiated settlement with file-sharing sites.

Swedish Pirate Party Surges Following P2P Ruling

A controversial decision by a Swedish court against online file-sharing site The Pirate Bay (TPB) last week has led to a surge in membership of a related political movement, the Pirate Party, turning it into Sweden's fourth largest political force ahead of the European elections in June.

The Swedish Pirate Party (Piratpartiet) was established in 2006 and has inspired sister parties worldwide, which are campaigning on a platform of reforming copyright law, abolishing patents, and bolstering the right to privacy, both on and offline.

Though the two organizations are not officially affiliated, the Pirate Party's fate is closely tied to that of controversial website TPB, one of the world's top file-sharing sites.

The four founders of TPB were last week convicted of breaching copyright and handed hefty fines and one-year jail sentences, in what was seen as a landmark ruling.

Anger has been widespread across the EU - and Sweden in particular - at what many commentators see as the scapegoating of TPB in a verdict that favors major industry players over file-sharing (P2P) consumers.

An unprecedented public reaction to TPB's verdict in Sweden led to membership of the Pirate Party skyrocketing from just a few thousand to almost 30,000 in the space of a few days.

By sheer weight of numbers, this now makes the party Sweden's fourth-largest, overtaking established heavyweights such as the Green Party.

The 'pirates' will now contest the European elections in June. The party's Vice Chairman Christian Engstrom - who believes the ruling came about as a result of the powerful American film and music industry applying pressure on the Swedish government - told EurActiv that "this verdict is our ticket to the European Parliament."

He believes the popular anger inspired by the case can be translated into electoral gains for the Pirate Party, following its unprecedented surge in membership. "If everyone who is angry about this ruling votes for us, we'll take at least one seat" in the elections, he said.

Swedish ISPs Reject Requests to Block The Pirate Bay

The recent conviction of the founders of Swedish BitTorrent tracker site The Pirate Bay (TPB) has apparently emboldened the International Federation of the Phonographic Industry (IFPI), which was part of the entertainment industry team suing the site for copyright infringement related damages, to demand Internet service providers (ISPs) in that country begin blocking access to the site by customers.

But, according to reports, the ISPs have refused to comply with the requests, saying that the ruling applies to those charged and convicted, not to them.

"In part, this is not a legally binding decision, but above all, this is a judgment against TPB and nothing that effects any service provider," said Patrik Hiselius, a lawyer at ISP Telia Sonera. "We will not take any action to block the contents if we are not compelled to do so."

ISPs Bredbandsbolaget and Com Hem echoed his sentiments, with the former emphasizing that it's not the job of an ISP to dictate what sites customers can or cannot visit.

"We will not censor sites for our customers; that is not our job," added Jon Karlung, Managing Director of Bahnhofs. "I am against anything that contradicts the principle of a free and open Internet."

Future of P2P: What Comes After The Pirate Bay

The verdict against The Pirate Bay (TPB) could turn out to be something of a game changer for P2P file sharing. Granted, the four defendants have already filed their appeals, and the site is currently up and running. In fact, there are 22 million peers connected, which suggests that most Pirate Bay users don't feel threatened in any way by the court's decision.

However, history has shown that court verdicts against high-profile file-sharing services can lead to the emergence of newer and technically superior platforms. This trend could be accelerated by renewed attempts to take down TPB's infrastructure. So what's in store for the future of P2P?

Matt Mason, author of the book The Pirate's Dilemma tweeted that "TPB's trial will change things the way the Napster shutdown changed things."

That's an interesting thought. Of course, the Napster shutdown didn't change too much for file sharers, who just migrated to other platforms. But the trial against and eventual demise of Napster changed P2P as a whole, because it led to the emergence of Gnutella and Kazaa, both of which eventually became more mature technologies, capable of handling far greater numbers of file sharers with a lot less infrastructure.

The same happened when Kazaa and its siblings Grokster and Morpheus were sued and eventually lost in US Supreme Court in 2005. The court verdict, commonly known as the Grokster decision, led to the emergence of a number of commercial outlets based on BitTorrent technology as well as an increased focus on Torrent and other P2P community webstes.

There has been a lot of speculation in recent weeks as to whether TPB will eventually be forced to shut down as well, and what impact that might have. Some believe that any takedown of TPB's trackers (the servers that facilitate the actual P2P connections between its users) will lead to a complete meltdown of the BitTorrent world, while others hope that competing sites would just take over.

A third faction thinks that TPB will live on forever. However, that notion doesn't seem to be shared by Peter Sunde aka brokep. The outspoken TPB spokesperson has more than once stated that BitTorrent in its current state will be surpassed by a more advanced technology which will eventually make TPB obsolete. So what will this post-Pirate Bay future look like? There are already two important trends emerging:

1) P2P is becoming part of the media web. BitTorrent was a first step towards web-centric P2P, but its implementation to date has been rather clunky, depending on both a browser for search and a client for downloads. Attempts to bridge this gap have been getting more and more sophisticated in recent months, with plug-ins like LittleShoot bringing BitTorrent to the browser and web services like BTaccel utilizing cloud computing as a web proxy for P2P.

At the same time, clients are becoming more web-aware, with LimeWire and Miro using P2P to power open content directories, and Vuze opening up to third-party search. Eventually, P2P could become something like the engine under the hood that powers the media web, regardless of whether the browser is called Firefox or Miro.

2) P2P is also becoming more social. Another emerging trend that BitTorrent itself hasn't been particularly good at is being social. BitTorrent has reduced social interaction to a mathematical formula - upload bits to others in order to get good download rates - and left it up to torrent sites to facilitate community. Some have been really good at this, but even successful communities generally lack tools for direct and real-time user-to-user interaction and discovery.

LimeWire and other dedicated social sharing clients have started to fill this gap. Tribler is proving that social recommendations can be used to discover new content in a P2P environment, and Wua.la has shown that users want to self-organize in small communities that are much more like Facebook groups than private torrent sites.

Combine these two trends and you get an idea of what future file-sharing services will look like. Personally, I wouldn't be too surprised to see such services become more popular than today's BitTorrent sites while TPB is still tied up in court.

Tech Industry Cheers as Obama Taps Chopra for CTO

It may not be the Cabinet-level post that some were hoping for, but President Obama finally named the US's first Chief Technology Officer (CTO) on Saturday morning during his weekly radio and Internet address.

Aneesh Chopra, currently Virginia's Secretary of Technology, got the nod and will soon join his former colleague Vivek Kundra, the national Chief Information Officer (CIO), on a team tasked with using technology to make government more efficient.

"Aneesh will promote technological innovation to help achieve our most urgent priorities - from creating jobs and reducing health care costs to keeping our nation secure," Obama said in his Saturday radio address.

"Aneesh and Jeffrey Zients, the newly appointed Chief Innovation Officer, will work closely with our CIO, Vivek Kundra, who is responsible for setting technology policy across the government, and using technology to improve security, ensure transparency, and lower costs," he said.

During the campaign, the high-tech community buzzed about who might fill the CTO slot, which the campaign suggested would be a cabinet-level position. Plenty of bold-faced names were floated as possibilities, including Google CEO Eric Schmidt. Silicon Valley's excitement about the job appeared to fade somewhat over the past few months, however, when it became unclear how much of a role the CTO would have in setting national technology policy. President Obama's chief technology adviser during the campaign, former venture capitalist Julius Genachowski, was considered a candidate for the job but he opted to head the Federal Communications Commission (FCC) instead. Genachowski is still awaiting Senate confirmation as FCC Chairman.

Chopra will be an assistant to the President and his formal title will be Associate Director for Technology under the White House's Office of Science and Technology Policy. He's led tech efforts for the state of Virginia since 2003 and previously worked as Managing Director with the Advisory Board Company, a health-care industry advisory and research firm.

Silicon Valley execs and tech bloggers sounded genuinely excited about Obama's choice Saturday morning and tech industry lobbying groups TechNet and the Business Software Alliance (BSA) quickly released statements of support, as did several tech heavyweights.

Privacy Experts Urge Regulation of Net Filtering Methods

Privacy experts urged the House Energy and Commerce Communications Subcommittee this week to regulate a type of computer network filtering employed by broadband Internet providers for security because it could also be used to build extensive customer profiles and target content and advertising without consent.

An executive representing network providers such as Charter Communications, Comcast, and Time Warner pressed members not to legislate and instead allow stakeholders to craft a market-based solution to concerns about deep packet inspection (DPI).

Subcommittee Chairman Rick Boucher (D-VA), who is working on a broad bill aimed at protecting individuals' Internet privacy, said the hearing was the first in a series to inform that process. A second hearing, which he is planning jointly for early summer with the Energy and Commerce Commerce, Trade and Consumer Protection Subcommittee will focus on behavioral advertising where web firms and marketers likely will testify. "We see this measure as a driver of greater levels of Internet uses," Boucher said.

Boucher and House Energy and Commerce Communications Subcommittee ranking member Cliff Stearns (R-FL), agreed they will use as a starting point legislation they co-sponsored four years ago that required consumer notification and prominent privacy policies that explain what is being collected and how it could be used, sold, or otherwise disclosed. Consumers would have been able to opt-out and violators would have faced hefty fines.

Energy and Commerce Oversight and Investigations Subcommittee Chairman Bart Stupak (D-MI) said Internet users lack a clear understanding of what happens with their information, and existing law does not give a solid definition of when affirmative consent is required. Congresswoman Anna Eshoo (D-CA) argued any legislation should ensure web-based services and broadband providers are treated differently.

On a related track, aides say Energy and Commerce Consumer Protection Subcommittee Chairman Bobby Rush (D-IL), will soon reintroduce a bill to require strong security policies from firms that collect and store sensitive information and provide for nationwide notification in the event of a data breach. That bill and a measure sponsored by Congresswoman Mary Bono Mack (R-CA) that would regulate P2P file-sharing services will be the focus of a May hearing, aides said.

Lobbyists Get Congress to Investigate P2P Software

Just a couple weeks ago, I received a ridiculous PR pitch from an entertainment industry lobbying group suggesting that a story that "hasn't really gotten the attention it deserves" is the "threat" from P2P software being used to "expose private documents to the world." The PR guy offered to help walk me through the process of downloading LimeWire and finding such "exposed documents."

Of course, what the PR guy left out is the reason this story hasn't received that much attention: because it's a bogus story that's been debunked for years - but it's a favorite of the entertainment industry and its lobbyists in trying to come up with any reason to get Congress to issue laws against file-sharing software.

However, it was obvious that this PR campaign was a set-up: something bigger was underway, and, indeed, now we find out that these entertainment industry lobbyists have had a chance to bubble up yet again this silly idea to Congress, leading to yet another investigation of file-sharing services. Of course, we did this already.

Two years ago, there was a bunch of grandstanding in Congress because some government officials had leaked documents possibly (though, not definitely) via LimeWire. But, of course, the target was wrong. It wasn't LimeWire that was the problem, it was government employees being stupid and setting up private government documents in their shared folders and poor government computer security systems that allowed this to happen. But rather than blame bad government computer security or clueless users, the government set upon LimeWire as the problem (encouraged, of course, by the entertainment industry's lobbyists).

The PR campaign and the Congressional investigation didn't happen in the same month by accident. You can pretty much assume that the whole effort was orchestrated by these lobbyists as yet another misguided attack on file-sharing software, playing up the ridiculous idea that it's the software that's responsible for people leaking documents, rather than user stupidity and bad security.

It's nice to see some in the mainstream press not fall for this bogus story. The LA Times notes how pointless this effort is, pointing out how the whole thing is misguided.

Congress Takes on File Sharing, Again

The news that a House committee was reopening its investigation into security risks posed by file-sharing software reminded me of something one of my pals in the computer-security field once told me: The biggest vulnerabilities aren't caused by deficiencies in machines or their software; they're caused by the humans who use them. It's a point that seems lost on the committee.

Ever since successors to Napster's song-swapping program made it possible for users to share any file stored on their PC, people have been unwittingly sharing address books, financial records, resumes, and other personal items. They did this because they didn't bother to check which folders the software was offering to the public, or they put items into shared folders that didn't belong there. And they continued to do it even as the programs changed their default modes to force users to be more selective about their sharing. When the file sharers are using office or government computers, the leaks can be even more damaging. The problem can be mitigated with better software design, but it can't be eliminated - just as the government can't stop defense contractors from carelessly losing their laptops.

The Oversight and Government Reform Committee had conducted hearings in 2007 into the inadvertent sharing of sensitive and personal information over LimeWire and other P2P networks. At the time, they extracted a promise from the Lime Group to change the program to deter such leaks. But the trade group representing P2P companies, the Distributed Computing Industry Association (DCIA), had already been working with the Federal Trade Commission (FTC) on this problem, and it offered to work with the committee as well. In fact, the association had been active on the issue since at least 2004.

Lime Group spokeswoman Linda Lipman told the Associated Press that the latest version of LimeWire software was designed not to share the file types associated with spreadsheets and documents. "In fact, the software does not share any file or directory without explicit permission from the user," she said.

Nevertheless, the Chairman and the top Republican on the Oversight and Government Reform Committee - Representatives Edolphus Towns (D-NY) and Darrell Issa (R-VA) - declared in a letter to the Lime Group, "It appears that nearly two years after your commitment to make significant changes in the software, LimeWire and other P2P providers have not taken adequate steps to address this critical problem."

Perhaps the real motive here is to find grounds to ban the software outright, which would please Hollywood but wouldn't solve the problem. Their letter to US Attorney General Eric H. Holder, Jr. suggests as much - it asks whether federal law enforcement efforts can protect people, businesses, and the government "from the security risks posed by P2P networks such as LimeWire." They sent a similar inquiry to the FTC. If they were really trying to solve the problem, they would conduct an investigation into what the Pentagon and government agencies were doing to keep file-sharing software off of computers used by their employees and contractors. The right approach here isn't to browbeat Lime Group; it's to demand better security practices by the people who work on the government dime.

"Since publishing these in 2008," Lafferty wrote, "we have also completed a compliance report that can be reviewed here. As you will see, our industry takes the safety of consumers very seriously. Once this concern was recognized, we responded proactively. Our best advice now - to parents and children alike - is similar to that given by other Internet software distributors: Please upgrade to the latest version for the best performance and the safest experience."

Coming Events of Interest

LA Games Conference - April 28th-29th in Los Angeles, CA. Focused on business, finance, and creative developments in the games industry, including mobile, online and console markets, and the increasing intersection of Madison Avenue and Hollywood with the industry.

Digital Hollywood Spring - May 5th-7th in Santa Monica, CA. With many new sessions and feature events, DHS has become the premiere digital entertainment conference and exposition. DCIA Member companies will exhibit and speak on a number of panels.

Streaming Media East - May 12th-13th in New York, NY. The number-one place to see, learn, and discuss what is taking place with all forms of online video business models and technology. Content owners, viral video creators, online marketers, enterprise corporations, broadcast professionals, ad agencies, and educators.

World Copyright Summit - June 9th-10th in Washington, DC. The international forum that brings together all those directly involved in creative industries to openly debate the future of copyright and the distribution of creative works in the digital era. WCS is organized by CISAC, the International Confederation of Societies of Authors and Composers.

Structure 09 - June 25th in San Francisco, CA. A world-class roster of speakers break down how to put cloud computing to work. Cloud computing's movers and shakers go beyond theory to discuss how they have leveraged cloud computing in their businesses.